Official: Bank of Montreal ROPS schemes in Canada for over-55s only

All three of the only recognised overseas pension schemes in Canada to survive HM Revenue & Customs’s latest purge of such vehicles on its official list will only accept pension transfers from the UK of scheme members who are aged 55 or over, International Investment can report today.

This confirms information we had been told earlier this week, by a pension scheme holder who told us he had sought to move a pension to one of the three schemes, all of which are operated by the Bank of Montreal, and was told this was the case.

This individual, who requested anonymity, said he had been told that he could move his pension to the BOM scheme, providing he was at least 55, but otherwise, he could not.

Canadian schemes only accept UK pensions of individuals who are moving to, or returning to, Canada, making it slightly different than some other ROPS jurisdictions, such as Gibraltar and Malta, which are licensed to handle “third country” ROP schemes.

Last night, a Bank of Montreal spokesperson said, in an email response to a question on the matter, “regarding your question [about whether the three remaining ROPS schemes on the list will only accept the UK pensions of 55-year-olds-and over]…yes, it is true for all three BMO ROPS”.

As reported here last week, the number of Canadian ROPS – which used to be known as Qualifying Recognised Overseas Pension Schemes – on HMRC’s online ROPS list had been falling steadily for months, when, on 15 November, the twice-monthly updated list revealed that just the three BOM schemes remained. In July there had been 68 schemes on the list, and in the recent past, as many as 95.

No explanation has ever been given for the steady drop in the numbers, although some UK pension transfer specialists had told International Investment that they believed the fact that Canada’s domestic pensions legislation permits pension scheme holders to access their pensions before the age of 55 in certain situations was the concern.

As part of a continuing effort to crack down on the abuse of overseas pension transfers, HMRC introduced a new ‘Pension Age Test’ last year, mandating that UK pensions could not be transferred to any overseas scheme that permitted the pension scheme member to access their pension before their 55th birthday. This was aimed at removing a reason some individuals might have sought to arrange an overseas pension transfer (or been talked into seeking one by someone keen to pocket a transfer fee).

Under the new regulations, anyone found to have moved their UK pension to a scheme that would permit someone to access their pension funds before their 55th birthday, directly or indirectly, would face a significant penalty, known as an “un-authorised payment charge”, which would be levied against them by HMRC.

This is the case, pension industry experts point out, even if they themselves never actually attempted to access their pension early, or indeed, in theory, even if no one does – all that matters is that it is theoretically possible.

After introducing this new rule HMRC then stunned the UK and international pensions transfer industry by revealing – with publication of its updated list of schemes, in April 2015 – that all but one Australian scheme had been deemed to have failed to meet this new standard.

Before this particular day, the HMRC list had showed some 1,653 Australian schemes that were prepared to take UK pension transfers.

Asked for comment, HMRC has consistently said that it doesn’t comment on “identifiable jurisdictions”.

The matter of the disappearing Canadian ROP schemes was flagged up earlier this year by pension fund transfer experts at Montfort International, a Guildford, Surrey-based advisory business which has specialised in overseas pension transfers for more than a decade.

‘Raises questions’

The matter of the disappearing Canadian ROP schemes was flagged up earlier this year by pension fund transfer experts at Montfort International, a Guildford, Surrey-based advisory business which has specialised in overseas pension transfers for more than a decade.

One of the Montfort team, head of financial planning Eugen Neagu, said his own independent research of the Canadian Federal Statutes and the Canadian States Statutes for all retirement plans based in Canada, over the past six months, had already led him to conclude that “anyone transferring a UK pension to Canada before the age of 55 could, if they were able to prove ‘hardship’, gain access to their pension cash ahead of their 55th birthday, [as well as if] the were to move out of Canada, for example, to take a job in the US”.

For this reason, he is adamant that there should have been far fewer pension transfers to Canada from the UK, especially recently, when it was clear that something was happening, with the steady disappearance of schemes from the list.

Even now, Neagu said, not having seen the BOM scheme rules, “I would urge for caution for any UK IFA who sanctions a transfer to any of [them].

“To be [completely safe to transfer UK schemes into them], these Bank of Montreal RRSPs should have had a rule in their scheme rules that states they do not accept members under the age of 55, from 6 April 2015.

“We would need to see the scheme rules in order to be sure, and they have not yet provided them to us.”

As for the other Canadian schemes not now on the list, Neagu said he is personally convinced that they must have known that their schemes were at risk of not meeting HMRC’s Pension Age Test, “otherwise why would they have had such lengthy and detailed disclaimers in their membership applications, saying that they accepted no liability if the transfer in question were to result in an unauthorised payment charge?

“This whole matter also begs the question about what the situation may be in other jurisdictions where local residents are able, under local pension legislation, to access their pensions before the age of 55.”

French, Italian ROP schemes also hit

As reported, on 15 November, addition to removing some 49 Canadian ROP schemes from its most recent list of such entities, HMRC also took an axe to dozens more, including all of the schemes that had existed just two weeks earlier in France and Italy.

In total, some 82 schemes that had been on the previous version of the list, published on 11 November, were not to be two weeks later, when it was updated.

As of 15 November all 19 Italian ROP schemes vanished, as did all 11 French schemes. One each had also been removed from the Guernsey, Ireland and Norway sections of the list.